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How Tumblr went from $1 billion in Yahoo salary to $3 million in sellout

In this weekly series, CNBC takes a look at the companies that made the inaugural Disruptor 50 list 10 years later.

Tumblr – the short-form multimedia blogging platform that in many ways defined the online sensibilities of a coming-of-age generation – turned 15 this year.

Despite the past few years of declining users and declining cultural relevance, 2022 has offered a glimpse of the platform’s hope for re-cultivated popularity and prominence, as new leadership grows. builds on the ethos of creativity that spawned the platform.

From its earliest days, Tumblr was characterized by its rejection of the mainstream and its embrace of unfettered creativity.

In 2007, after stumbling upon a microblog called Projectionist, which grouped tumblelogs — a variation of blogging that favors short, multimedia posts over longer, editorial posts — Tumblr co-founder David Karp became fascinated with the alternative. to traditional blogs. He put his software consulting efforts on hold and focused on building his own tumbleblogging platform – which he later named Tumblr.

The platform allowed users to post a myriad of different content, ranging from photos and gifs to music and text entries. Since its inception, Karp has prioritized features it believes would cultivate the most creativity — and rejected the monetary and status-based incentives that it believes other platforms, such as YouTube and Facebook , relied to stimulate use.

At the time, he spoke loudly on the subject, directly contrasting Tumblr’s anti-advertising and anti-influencer culture with what he perceived to be the anti-creative practices of other major platforms. “The only real tools for expression today is YouTube, which makes my stomach turn,” he said at the time. “They take your creative works – your movie that you’ve poured hours and hours of energy into – and they put ads on it. They make the experience as crude as possible to watch your movie. I’m sure that will help to Google’s bottom line; I’m not sure it will inspire creators.”

Tumblr positioned itself against other social media platforms of the time in another way – with an emphasis on anonymity. While Facebook aimed to put a name and a face to the entire social network of users, Tumblr thrived on anonymous accounts, in which the platform displayed no number of subscribers or public friends, no sections comments and did not require users to provide real names or information.

At the end of Tumblr’s first year, Spark Capital invested $750,000 for a valuation of $3 million. And soon after, Spark Capital and Union Square Ventures invested another $4.5 million.

In 2009, Tumblr won the Crunchie award for “Best New Startup” and by 2010 it had amassed over a million users, prompting investors to pour another $85 million into the company, valuing it at $850 million.

Tumblr was exploding and by the end of 2011 the platform had accumulated over ten billion blog posts.

Clearly, users were drawn to the platform’s unique environment, where they could exchange photos, aesthetics, art, music and ideas, cultivating a sense of style and public opinion, without ever having to reveal their identity.

Celebrities, such as Frank Ocean and Taylor Swift, also flocked to the site to interact with fans, and entire fandoms centered around TV shows and musical artists took shape, and a distinctly Tumblr aesthetic, which characterized the digital sensibilities of the mid-2010s, began to emerge.

But shortly after making CNBC’s first-ever Disruptor 50 list in 2013, Yahoo acquired Tumblr for a then-staggering $1.1 billion, along with Yahoo CEO Marissa Mayer. promising“so as not to ruin everything.”

But Yahoo was faced with an undeniable reality: the fact that Tumblr had never quite managed to become profitable. The platform was used and loved by a massive user base, but it didn’t translate into profits. Yahoo tried to monetize the platform through ad sales, which previous executives had resisted, and struggled to do. The fact that Tumblr did not require the true identity of the user and that adult content permeated the platform kept potential advertisers away.

Additionally, as social media began to evolve into a creator economy that emphasized the real faces and voices of creators, Tumblr, which always thrived on anonymity and lacked a strong video presence or of a follower count, struggled to keep up. The evolution of management knew little about the culture of the platform, and the platform’s adherence to anonymity and lack of appeal to advertisers led to Tumblr’s decline.

As Tumblr struggled to redefine itself, competitors like Twitter, Instagram, and Facebook developed new front-end features that attracted users in droves. And Yahoo itself was in trouble. In February 2016, after posting a net loss of $4.44 billion in the fourth quarter of 2015, Yahoo announced that it had written down Tumblr’s value by $230 million. In 2017, Tumblr was again sold, this time to Verizon. The following year, Apple removes Tumblr from its App Store citing the presence of child pornography on the application.

Tumblr and Verizon executives responded by banning all explicit content, but banning explicit content did not satisfy users or advertisers. It was a long time coming and advertisers were unwilling to invest a substantial amount of money on a platform that contained content that was not brand appropriate when there was also an exodus mass of app users with the explicit content algorithm criticized for flagging content inaccurately. A few months after the announcement of the decision, the platform’s traffic dropped by more than 30%.

In 2014, at least 84 million articles were published every day. By 2018, that number had dropped by more than 50%, to 30 million. And in 2019, software developer Automattic acquired the platform for just $3 million, returning to the company’s original first-year VC funding valuation.

Despite Tumblr’s decline, Automattic CEO Matt Mullenweg says Tumblr’s future is just beginning.

He has spent the past three years fixing bugs, pending service requests, and platform design issues that Automattic inherited when acquiring the platform. “Honestly, over the past two years, we’ve done a lot of catching up with Tumblr,” he told The Verge earlier this year. “And the problem was bigger than I imagined.”

Mullenweg also suggested that the company is reworking the scope of Tumblr’s current explicit content ban, which has driven so many users away. “If you look at our other products like WordPress.com, we have policies that allow a lot more than what’s currently allowed on Tumblr,” he told The Verge. “That’s what we’re going to try to normalize, because these policies have evolved, recurred and worked very well to allow a statue of David or The Birth of Venus. By now this might be deleted – or in the old Tumblr it might have been deleted. It’s obviously art,” he said.

His vision further includes the potential for NFT experimentation.

The proof that there may indeed be the possibility of a second renaissance for Tumblr lies in its user data – that 60% of Tumblr users are Gen Z — indicating that while many original users have since left the platform, young people still flock to it, seeking the same market for free expression that once made Tumblr a hit with creators.

“Art is necessary to society. It feeds the soul. It’s naturally transgressive,” Mullenweg told The Verge. “Art pushes boundaries. We need to evolve how Tumblr moderation works to encompass this. It needs to be the best place on the web for art and artists – a place where they can have a direct relationship with their public and people can track things, not an algorithm trying to infuriate you.”

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